from the i've-got-a-feist-to-show-you dept

We've noted in the past just how incredibly backwards facing the real estate industry is. Last year, I got to present at a real estate industry conference, where I compared how the MLS (multiple-listing service) players were similar to the record labels and music studios, acting as monopolist gatekeepers to information. And, just as the entertainment industry gatekeepers have attacked disruptive innovators with lawsuits, so too do the MLS operations. In the past we've discussed how they've attacked web upstarts like Zillow and Redfin. The latest is that they've gone after NeighborCity, an offering from a company called American Home Realty Network (AHRN), who dared to make use of real estate data to actually rate real estate agents on their performance. As you might imagine, the real estate agents don't like that very much.

AHRN noticed that it suddenly received a flood of complaints and cease & desist letters conveniently timed exactly to the dates of the National Association of Realtors's (NAR's) annual meeting in November of 2011 -- and each of the letter seemed to include similar language. After responding to all of the complaints, two separate MLS providers sued AHRN. Amusingly, prior to the lawsuit, an executive for one of the MLS's (NorthStar, from Minnesota) appeared to accidentally cc AHRN on an email to its lawyer, complaining about "the bad fellow" (AHRN CEO Jonathan Cardella) not simply bending over and taking down NeighborCity in response to the complaints, and suggesting that filing copyright infringement lawsuits against AHRN/NeighborCity would be useful in bringing a "world of hurt" on the company. The email also discusses having various MLSs share the costs of litigation.

Indeed, NorthStar and a separate MLS, Metropolitan Regional Information Systems, Inc. (MRIS) appear to have followed through and sued for copyright infringement. You can see MRIS's filing embedded below. MRIS repeatedly insists that it holds a copyright on its database, completely ignoring fairly well-established law that you can't copyright facts, and that MRIS's copyright (if there is one) is limited to the creative works it added to the process. Instead, MRIS repeatedly claims to hold a copyright on the entirety of the database. It also claims to hold the copyrights on the photos uploaded by individual agents, saying that as part of that process, the copyrights are assigned to MRIS.

NeighborCity has hit back with its response (also embedded below), arguing that MRIS has no such copyright, and citing the litany of cases that establish you cannot copyright factual information, relying heavily (of course) on the important Feist ruling in the Supreme Court, which rejected "sweat of the brow" arguments for copyright, and said you cannot copyright a collection of facts, such as a telephone book.

It seems that the chance of succeeding on such a claim is slim to none. MRIS and its lawyers should be slapped around by the judge for even trying such an argument. MRIS clearly seems to recognize this by trying to use the photographs to make a separate argument. It claims that every photograph that is uploaded has its copyright assigned to MRIS (I'm actually a bit surprised that real estate agents would agree to this...) and thus it also alleges infringement on the photos. AHRN, however, points out that MRIS failed to register the individual copyrights on the photos, instead only registering a copyright on the "catalog." Here, AHRN notes (again) that there is widespread precedent limiting what sort of copyright can be applied to a catalog where little to no additional work was done by the party claiming copyright. Further, it points to the Muench case, which noted the "the registrant of a compilation copyright must list the names of the authors of the underlying works." That's just a district court ruling, so it's not clear how big an impact it would have.

AHRN also questions the claim that anything it has done creates irreparable harm to MRIS is completely baseless. MRIS's best argument is that outdated info on NeighborCity reflects poorly on MRIS, but AHRN points out that it would reflect much worse on NeighborCity itself.

The real issue, of course, is almost certainly that the real estate agents don't like the fact that they're being rated by the site. The fact that NeighborCity has operated for years without a problem... until it put up its agent rating service, makes that pretty clear.

The larger issue may be that AHRN is also alleging that the action confirms that real estate agents are violating the final judgment in the antitrust lawsuit the US government filed against the National Association of Realtors. The email that was sent to AHRN certainly seems to indicate plans for concerted action. Combined with the timing correlating to the NAR event... and there's at least a reasonable case for the DOJ to look into the activity here by real estate agents and MLS services.

In the end, though, this is the same story we've seen over and over again. Gatekeepers don't like being disintermediated by disruptive innovation. So, rather than adapt, they sue.